How To Start A Business In Louisiana
Louisiana, a state with a vibrant culture and rich history, offers an ideal environment for aspiring entrepreneurs. Its pro-business climate, strategic geographic position, and robust infrastructure provide numerous advantages for businesses seeking growth and prosperity. Furthermore, Louisiana’s skilled workforce, diverse industries, and high quality of life make it an attractive destination for those looking to embark on their entrepreneurial journey.
Louisiana Small Business Stats
- There are 471,240 small businesses in Louisiana, which is 99.5% of all businesses in the state. (2022 SBA Small Business Profile)
- Exports by small Louisiana firms reached $16.9 billion. (2022 SBA Small Business Profile)
- Small businesses in Louisiana employ 905,726 employees, which is 52.7 percent of the total employees in the state, which exceeds the national state average. (Statistics of US Businesses)
- Though Louisiana was ranked as the #48th best state overall for business by CNBC, the state ranked number 5 for the cost of doing business.
- WalletHub ranked Louisiana as the 12th best state for business costs.
- Louisiana was ranked #1 for workforce training by Business Facilities.
Steps To Starting A Business In Louisiana
By utilizing our comprehensive checklist, aspiring small business owners can confidently and clearly navigate the complexities of establishing a small business in Louisiana. The checklist serves as a roadmap, outlining crucial steps such as writing a business plan, business registration, funding, and more. By following this guide, entrepreneurs can avoid common pitfalls and capitalize on the abundant opportunities available in Louisiana’s thriving business landscape, ultimately setting the stage for success and growth.
Step 1: Choose a Business Idea
Selecting the right business idea is the first and most crucial step on the path to success. With its diverse economy and vibrant culture, Louisiana has numerous opportunities await aspiring entrepreneurs. To help you choose the ideal business idea, here are some tips to help you decide:
Assess your passions and skills: Begin by reflecting on your interests, passions, and expertise. Consider your hobbies, the industries you’re most familiar with, and the unique skills you possess. Pursuing a business idea that aligns with your passions and strengths increases the likelihood of success and makes the journey more enjoyable.
Identify market demand: Research the market to identify gaps and unmet needs. Study trends and consumer preferences in Louisiana, paying particular attention to emerging industries and areas of growth. By addressing a genuine market need, your business will have a better chance of flourishing.
Evaluate competition: Analyze your potential competitors to understand their strengths, weaknesses, and market positioning. This will help you identify opportunities to differentiate your product or service, giving you a competitive edge.
Consider scalability and profitability: Opt for a business idea with the potential to grow and generate sustainable profits. While it’s natural for businesses to evolve over time, starting with a scalable idea ensures long-term viability and success.
Test your idea: Before fully committing to your business idea, validate it through market testing. Gather feedback from potential customers, conduct surveys, or create a minimal viable product (MVP) to gauge interest and refine your offering.
Remember, every successful business begins with a single idea, fueled by passion and determination. As you embark on your entrepreneurial journey, embrace the challenges and uncertainties as opportunities to learn and grow.
To learn more about over 300 industries, check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.
Step 2: Write a Business Plan
A well-crafted business plan plays a role in the process of establishing a successful venture. In Louisiana, a business plan serves as a vital tool for several reasons:
Roadmap for Success: A business plan outlines the company’s mission, goals, and strategies, acting as a roadmap for success. It helps entrepreneurs focus on their objectives and establish a clear path to achieve them.
Attracting Investors and Financing: A solid business plan is essential for securing financing from banks and investors. It demonstrates the viability of the business idea and the potential for profitability, instilling confidence in potential investors.
Identifying Market Opportunities: A comprehensive business plan includes market research, which helps entrepreneurs identify opportunities within their target market and industry.
Mitigating Risks: A business plan helps entrepreneurs anticipate and mitigate risks by developing contingency plans and backup strategies.
Not sure how to get started on your business plan? Check out our guide on writing a business plan.
Step 3: Select a Business Entity
A business entity (also called a legal or business structure) refers to the legal form that a business takes, which determines how it is taxed, governed, and how liabilities are allocated. In Louisiana, the primary business structures are sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). It is essential for new business owners to understand the differences as the choice of a business entity depends on the individual needs, goals, and risk tolerance of the business owner.
Pros: The easiest of the four types of business structures, a sole proprietorship involves a single individual operating the business. Setting up as a sole proprietor requires minimal paperwork (which primarily consists of registering an Assumed Business Name) and setup costs. The owner has complete control over the business decisions.
Cons: The significant drawback is that the owner is personally liable for all business debts and legal claims, putting personal assets at risk.
Pros: In a general partnership, two or more individuals jointly own and operate the business. Partners share profits, losses, and decision-making responsibilities, enabling a collaborative approach to business management.
Cons: Similar to a sole proprietorship, partners in a general partnership have unlimited personal liability for the business’s debts and legal claims. Additionally, disputes among partners can disrupt business operations.
Pros: A corporation is a separate legal entity owned by shareholders, providing them with limited liability protection. This means that shareholders are generally not personally liable for the corporation’s debts or legal claims. Corporations can also raise capital by issuing shares, making it easier to attract investors.
Cons: Corporations are more complex and costly to set up, requiring extensive paperwork and adherence to strict regulations. Corporations can also be subject to double taxation, as both the corporation’s profits and dividends paid to shareholders are taxed.
Related: How to form a Louisiana Corporation
Limited Liability Company (LLC):
Pros: An LLC offers the limited liability protection of a corporation while allowing pass-through taxation, avoiding the potential double taxation issue of the corporation.
Cons: Setting up an LLC is more complex and costly than a sole proprietorship or general partnership. There may also be additional state-level fees and regulations to comply with in Louisiana.
Related: How to form a Louisiana LLC
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
IncFile - Great service and free registered agent the first year.
Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!
ZenBusiness - Easy to use and free registered agent for 1 year!
Step 4: Register the Business
In Louisiana, businesses must obtain the appropriate licenses and registrations to operate legally. While this isn’t an exhaustive list, some common licenses and registration requirements in Louisiana include:
Business Licenses –The state of Louisiana doesn’t have a general business license; however, many cities require a business license to operate.
Federal Employer Identification Number (EIN): Many businesses need an EIN, including general partnerships, corporations, multi-member LLCs, or any business that has employees, which is a unique identification number assigned by the Internal Revenue Service (IRS). You can apply for an EIN online through the IRS website.
Business Tax License: Businesses selling products and certain services or will hire employees will need to register for a Business Tax License with the Louisiana Department of Revenue. More information about business licenses can be found on the geauxBIZ website.
Local Permits and Licenses: Depending on your business type and location, you may need additional permits and licenses from your local government. These can include zoning permits, building permits, and occupational licenses.
Industry-Specific Licenses: Some industries require additional licenses and permits to operate legally in Louisiana. For example, restaurants and food establishments need a health permit, while businesses selling alcohol must obtain an alcohol beverage permit.
Occupational License: Some services, such as physical therapists, interior designers, detectives, cosmetologists, barbers, architects, and massage therapists require licensing in Louisiana. While this isn’t a license on the business, licensing is required in order to operate.
Step 5: Open a Business Bank Account
Separating business and personal funds is a fundamental aspect of maintaining financial order and stability. Here are several reasons why this separation is essential:
Simplified Recordkeeping: Separating business and personal funds allows for more straightforward bookkeeping, making it easier to track income and expenses and to prepare financial statements and tax returns.
Professionalism: Using a business bank account for transactions reflects a more professional image to your customers and suppliers, building credibility and trust.
Tax Compliance: Mixing business and personal funds can lead to inaccuracies in tax reporting and raise red flags with the Internal Revenue Service (IRS) or Louisiana Department of Revenue. Maintaining separate accounts reduces the risk of tax-related issues.
Limited Liability Protection: For business structures such as corporations or LLCs, keeping personal and business finances separate is crucial for preserving limited liability protection. Commingling funds can undermine the legal distinction between the business and its owners, potentially exposing personal assets to business liabilities.
Step 6: Find Financing
Obtaining funding can be a major roadblock when starting a business.
Not only are there unfamiliar terms like collateral, equity, assets, liabilities, and others, but there are several sources of funding with different rules, processes, and costs.
There are various sources funding sources that are available from personal investment, conventional bank loans, Small Business Administration (SBA) loan guarantees, investors, grants, and many others, it can be difficult to wade through what is available and best for your business.
Step 7: Hire Employees
Hiring your first employee is an exciting milestone, but it also comes with responsibilities and understanding state and federal laws.
Employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.
Step 8: Obtain Business Insurance
Insurance plays an important role in safeguarding a business’s financial stability and protecting its assets which is an important step when starting a business. Insurance provides a safety net against unforeseen events, mitigating potential risks and losses that may arise during the course of business operations. Here are some key types of insurance that a small business owner in Louisiana should consider:
General Liability Insurance: This type of insurance protects your business from claims related to bodily injury, property damage, and personal injury caused by your business’s operations or products. General liability insurance is essential for businesses in various industries, as accidents and injuries can happen unexpectedly.
Property Insurance: Property insurance covers your business’s physical assets, such as buildings, equipment, and inventory, against loss or damage caused by events like fire, theft, or natural disasters. This coverage is vital for businesses with significant investments in physical assets.
Workers’ Compensation Insurance: In Louisiana, most employers are required to carry workers’ compensation insurance. This coverage provides benefits to employees who suffer work-related injuries or illnesses, covering medical expenses and a portion of lost wages. Workers’ compensation insurance not only fulfills a legal requirement but also protects your business from potential lawsuits related to workplace injuries.
Professional Liability Insurance: Also known as errors and omissions (E&O) insurance, professional liability insurance protects your business from claims related to negligence, errors, or omissions in the services you provide. This coverage is especially important for businesses offering professional services, such as consultants, lawyers, or accountants.
Commercial Auto Insurance: If your business owns or uses vehicles for work purposes, commercial auto insurance is necessary to cover potential damages and liabilities arising from accidents. This coverage extends beyond personal auto insurance policies and is tailored to the specific needs of businesses.
Business Interruption Insurance: Business interruption insurance compensates for lost income and additional expenses incurred if your business is temporarily unable to operate due to a covered event, such as a fire or natural disaster. This coverage helps ensure your business’s financial stability during challenging times.
Cyber Liability Insurance: With the increasing reliance on technology and the internet, businesses face heightened risks related to cyberattacks and data breaches. Cyber liability insurance covers expenses associated with a data breach or cyberattack, such as legal fees, public relations efforts, and notification and credit monitoring for affected individuals.
Step 9: Set up an Accounting System
Implementing a good accounting system is vital for businesses as it enables effective financial management, ensures tax compliance, and provides valuable insights to drive business growth and success.
While having organized and accurate financial records to stay on top of taxes is what often comes to mind first when discussing accounting, a good accounting system also by providing a clear picture of your business’s financial health, analyze your business’s performance, and more.
Related: Setting up accounting for a business
Common Questions When Starting a Business in Louisiana
Is Louisiana a good state to start a business?
Louisiana has several key factors that make it an attractive location for entrepreneurs:
Favorable Business Environment: Louisiana has a pro-business environment, with low corporate taxes and a range of financial incentives for new businesses. The state government actively supports new ventures and job creation.
Access to Ports: The Port of New Orleans and Port of South Louisiana are among the busiest ports in the United States, offering direct access to international trade and shipping networks.
Skilled Workforce: Louisiana has a diverse and skilled workforce, with many universities and technical schools that produce a steady stream of talented professionals. The LED FastStart program provides customized workforce solutions for businesses in the state.
Energy and Natural Resources: Louisiana is a leading state for energy production, with abundant natural resources, including oil, natural gas, and renewable energy sources. This provides businesses access to affordable energy and potential opportunities within the growing clean energy sector.
Growing Industries: The state has several growing industries, including advanced manufacturing, aerospace, agribusiness, digital media, and software development. These industries offer opportunities for entrepreneurs to build innovative businesses and capitalize on economic growth.
Quality of Life: Louisiana is known for its rich culture, history, and unique blend of French, Spanish, and African influences. The state offers a diverse and vibrant lifestyle, with world-class cuisine, festivals, and outdoor recreational activities. This contributes to a high quality of life for residents and entrepreneurs.
What are the steps to starting an LLC in Louisiana?
There are three main steps to starting an LLC in Louisiana. These include:
1. Making sure the LLC name is available
2. Appointing a Registered Agent
3. Filing the Articles of Organization
There are a few more details to learn about, so be sure to check out how to start an LLC in Louisiana.
How much does it cost to start an LLC in Louisiana?
The cost to start an LLC in Louisiana is $100 to file the Articles of Organization with the Louisiana Secretary of State.
What licenses do I need to start a business in Louisiana?
There isn’t a general business license required by the state, however, there are potentially several different licenses and permits a business will need to obtain before starting.